What happens to the family business following a divorce?

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What happens to the family business following a divorce?

On Behalf of | Jan 1, 2022 | Divorce

Divorce could affect more than just your family structure, especially if you and your spouse were in business together. Although the future of the business hangs in the balance, it does not necessarily translate to closing shop. Instead, the company’s fate depends on several factors, as discussed below.

Perhaps the most important one is ownership. Is the business considered separate or marital property? Even if the company was established before the marriage, the answer is not straightforward. The court will consider several factors in deciding this. They include:

  • The source of funds used to start the business
  • The contribution of each party to the company (labor or expertise)
  • The value of the business before and after divorce, among others
  • Any prenuptial or postnuptial agreements that relate to the business

Can you agree with your partner on how to run the business?

If you both have a stake in the business, you can agree on how to run the company’s affairs without letting divorce come in the way of things. However, if you cannot find common ground, it may be time to explore the other options at your disposal. 

Buying out your ex-spouse’s share in the company should be your next consideration, or giving up other assets or property in place of keeping the business. If you don’t find a viable solution, the only thing left is to sell the business and split the proceeds.

Selling a family business may not be something you want, which is why it is important to be ahead of any eventualities. Seeking experienced guidance about your divorce as soon as possible may be your best move.

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